Rullison & Co. will rotate 10% of its portfolio from investment grade into high-yield corporate bonds over the next six weeks, says Christopher Hayes, portfolio manager with the asset management firm in Rochester, N.Y. The manager--who favors a value investing style--believes a lot of high-yield paper has suffered due to the telecom crisis, adding to the spread-widening between investment-grade and junk bonds, and creating a lot of good buying opportunities in the lower credit range.
Hayes says he owns and intends to buy more Sea Containers Ltd. (Ba3/BB-) bonds: the 9.50%s of '03, 10.50%s of '03 and the 12.50%s of '04. He also plans on continuing his play in Xerox Corp (Ba1/BBB), via the 8.12%s of '02. In the power production end, he is looking at rotating into the 6.50% Southern California Edison notes of '01(Caa2/CC).
Hayes manages a $135 million portfolio whose asset allocation is 70% corporates, 25% treasuries and 5% in cash. He does not follow a specific benchmark but indicates that his portfolio's average duration ranges between 1.5-2.0 years.